ESG reporting update for asset managers

The FCA's Disclosure of Climate-Related Financial Information (Asset Manager and Asset Owner) Instrument 2021 is now in force and needs to be adhered to by asset managers exceeding £5bn in assets under management (AuM). The FCA's disclosure rules aim to bring asset manager climate-related reporting in line with the rules and guidance recommended by the Taskforce on Climate-related Financial Disclosures (TCFD). This follows government legislation which harmonised climate-related reporting for large trading UK companies and LLPs in 2022. 

The deadlines for climate-related reporting fall into three thresholds: 

1. Asset managers exceeding £50 billion in AuM; required to make the prescribed public disclosures by 30 June 2023.
2. Asset managers exceeding £5 billion in AuM; required to make the prescribed public disclosures by 30 June 2024. 
3. Asset managers with less than £5 billion AuM. These managers are exempt, for now, from the disclosure requirements however this will be reviewed in the future by the FCA. 

Disclosures

Asset managers need to make disclosures at entity-level and product-level:

1)     Entity-level

• Managers must produce an annual TFCD entity report published at a prominent place on their main website setting out how they take climate-related matters into account in managing or administering investments on behalf of their clients and consumers. 
• Entity-level reporting must be taken at a legal entity level (e.g. per company or LLP/LP) as opposed to a group entity level, however some obligations can be discharged by cross-referring to TCFD reporting by other group members.

2)      Product-level

• Managers must make disclosures (including a core set of climate-related metrics) on the products and portfolio of the legal entity in question. These should be made publicly and in a prominent place on their main website and included or cross-referenced in an appropriate client communication or provided on request to certain eligible institutional clients.
• Asset managers that provide discretionary portfolio management services to individuals or institutional investors, and unlisted unauthorised alternative investment funds (AIFs) must provide product or portfolio-level information to those eligible clients rather than make the above public disclosures.

For more information about the content of a TFCD entity-report and TFCD product-report please see the FCA's ESG Sourcebook. 

To get in touch with Howard Kennedy contact jonathan.cohen@howardkennedy.com or keith.lassman@howardkennedy.com. Or, to find out how we can help your business visit the Howard Kennedy Capital Markets page at https://www.howardkennedy.com/expertise/services/capital-markets.